Central Bank of Iran Applauds Private Firms for Helping Resist US Sanctions

Abdolnasser Hemmati praised private companies for helping bring in foreign currency via non-oil exports and, consequently, maintain stability of the forex market. 

Had it not been for the “dedication and efforts of the private sector” surviving the current difficult conditions would be difficult, he told a meeting of the Iran Chamber of Commerce, Industries, Mines and Agriculture’s board on Sunday.  

“The enemy’s aim in imposing sanctions was to stop the economy… this could not be realized but by destroying the national currency and undermining foreign trade,” the CBI website quoted him as saying, according to Financial Tribune.

Private businesses have helped meet foreign currency needs of the country by boosting non-oil exports. “This went a long way toward easing the pressure,” the senior banker said. 

He concurred, however, that the threats emanating from the illegal and hostile US sanctions persist, warning that the partial easing of conditions does not mean that the ploys and plots are things of the past.   

Referring to the impact of the restrictions on the oil industry, Hemmati spoke of $45 billion in lost revenues, underscoring the need to mobilize efforts to overcome the hard conditions and move forward.  

Aiming to cripple Iran’s economy, US President Donald in May 2018 abandoned the landmark nuclear deal signed between Tehran and the six world powers in 2015 and announced tougher sanctions to force “Iran back to the negotiating table.”

Last November he imposed what he and his aides describe the "toughest ever" sanctions on Iran’s oil exports. Fearing further increase in international crude oil prices and supply shortages, Trump granted sanction waivers for six months to eight main countries buying Iranian oil. 

Exporting oil in the international market became more difficult for Iran after the United States refused to extend the waivers in May 2019. 

FX Stabilization 

Hemmati dismissed allegations that the regulator was able to stabilize the forex market by curbing demand for foreign currency.

He made the comments in response to claims voiced by observers from some quarters that the CBI has artificially kept currency rates in check by restraining demand.   

He resorted to statistics to question such claims. “In the current calendar year (started March 20) orders for importing goods worth $32 billion were registered and more than $20 billion of which has already been procured”. 

Hemmati reiterated that the CBI considers the interest of the nation as a whole when drafting and enforcing rules governing the forex market and does not sacrifice the people’s interest for the personal gain of selected groups. 

“The central bank will not ignore the interest of 83 million Iranians at the altar of the interest of a small group.”

The CBI governor ascribed the stability in the forex market to the “positive performance” of non-oil exporters in repatriating overseas currency earnings to the treasury. 

According to Hemmati, since inception of the secondary forex market in April 2018 through May 2019, exporters brought back 71% of their income to the country. 

No CBI Affair 

The currency earnings that were brought back largely explain the reason behind lower forex rates, he said, reiterating that currency rates are not determined by the regulator.  

In the secondary market, locally known by the Persian acronym Nima, importers declare their currency needs, exporters register their currency proceeds and banks and authorized moneychangers act as dealers. 

CBI exercises oversight and controls currency demand and supply.

Rules related to the repatriation of export earnings became tougher after the reimposition of US sanctions. 

Exporters are now required to sell at least half of their export earnings at the secondary market at exchange rates set below the higher open market price. As per the regulations, at least 20% of total foreign currency sold in the secondary market must be in cash.

Repatriation of export earnings gained momentum after the secondary market registered steady growth in foreign exchange rates during the past few months.

This came after the gap between prices in the open and secondary markets were substantially reduced, thanks to the CBI efforts to stabilize currency rates in the open market while pushing up secondary market rates.